Ben Strack

HashKey Capital has linked up with index management giant FTSE Russell to give investors crypto exposure beyond the industry’s major assets.&nbsp;



The Hong Kong-based crypto firm worked with London Stock Exchange Group affiliate FTSE Russell to develop three indexes tracking the performance of a range of crypto assets.&nbsp;



Such assets “align with more nuanced investment strategies” across different crypto segments and market capitalizations, the company said Wednesday.



While one index tracks the top 20 crypto assets based on market capitalization, another targets assets comprising the ecosystem’s infrastructure layer — related to smart contract platforms and protocol interoperability, for example.&nbsp;



A third benchmark focuses on crypto assets with “application functionalities,” such as ones associated with staking instruments and decentralized finance.



The index launches follow the Securities and Exchange Commission’s <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">landmark approval of spot bitcoin ETFs</a> in the US. The products give investors an easier access point to the crypto market’s largest asset, which currently has a market capitalization of roughly $780 billion.&nbsp;



A US spot ether ETF could come later in 2024, some industry watchers believe. The SEC is slated to rule on one or more such proposed funds by May.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etfs-approved-ether-funds-next">After spot bitcoin ETF approval, eyes shift to ether fund decision</a>



But HashKey Capital managing director Deng Chao said in a statement there has been “a significant surge in demand from investors who want to diversify their portfolios beyond the established cryptocurrencies.”



<a href="https://blockworks.co/news/grayscale-ftse-russell-crypto-etf">FTSE Russell partnered with Grayscale Investments</a> in October as part of a similar effort to boost crypto diversification. Those indexes were set to focus on a range of crypto sectors: currencies; smart contract platforms; financials; consumer and culture; and utilities and services.



The new indexes also come after Haskey Capital parent company <a href="https://blockworks.co/news/trading-market-making-staking-see-funding">HashKey Group raised $100 million</a> in a Series A funding round at a $1.2 billion valuation. OKX Ventures participated in the round, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-01-16/crypto-firm-hashkey-raises-100-million-claims-unicorn-status">reported</a>.



HashKey Group <a href="https://twitter.com/HashKeyGroup/status/1747078787790151735">said</a> at the time the capital would be used to accelerate product diversification for its Hong Kong business, as well as to “drive the group’s compliant and innovative development globally.”



Updated Jan. 24, 2024 at 11:55 pm ET: Clarified that the fundraise was by HashKey Capital&#8217;s parent company.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

HashKey, FTSE Russell team up to offer ‘more nuanced’ crypto exposure

Michael Bodley

Hong Kong’s rollout of its licensing program for crypto companies that cater to retail traders — which comes as the United States maintains its more guarded regulatory posture —&nbsp;may represent an inroad for the city, industry participants say.



Interest in setting up shop in Hong Kong for digital asset operators, including exchanges, appears to have been on the rise since local regulators laid out their licensing program earlier this year.&nbsp;



<a href="https://blockworks.co/tag/hashkey">HashKey</a>, a crypto exchange based in Hong Kong that has customers throughout Asia, locked down Hong Kong’s first license for facilitating spot crypto trading with retail customers. Firms with strictly institutional dealings had already been permitted to obtain a separate approval from the Hong Kong Securities and Futures Commission. 



Galaxy Digital recently bolstered its presence in <a href="https://blockworks.co/tag/hong-kong">Hong Kong</a>. Jason Urban, the firm’s global head of trading, told Blockworks that its “newfound openness to crypto is already attracting fresh talent and capital, giving the industry an opportunity to build operations in Asia further, using Hong Kong as a center of gravity.”



<a href="https://blockworks.co/tag/galaxy-digital">Galaxy</a>, which maintains offices in several locations globally, recently brought on board a “new group of traders who work out of the city,” Urban said. 



Alvin Kan, Sei Labs’ head of Asia, told Blockworks that Asia is poised to become a “very capable growth area for the entire Web3 industry,” adding that the way “things are happening in the US” has added to the possibilities outside of the United States.



“Hong Kong has always been kind of a gateway to Asia,” Kan said. “If you look at the government, in terms of issuing licenses and so on, that is a signal to companies, saying, ‘Why don’t you come over and grow this Web3 industry?’”



HashKey’s Hong Kong efforts have been in the works for some time, with the exchange receiving approval to operate in the city near the end of last year — though it was limited to institutional customers.



Once a hotbed for activity — Wall Street banks like Goldman Sachs and JPMorgan for years maintained significant presences in the city — Hong Kong’s <a href="https://www.bloomberg.com/news/articles/2023-07-04/hong-kong-s-reopening-brings-scant-gains-for-financial-hub">influence</a> on and power within traditional finance has faded. But that could be an opportunity for crypto, traders say.&nbsp;



Thousands of employees of investment banks relocated amid Hong Kong’s <a href="https://www.timeout.com/hong-kong/things-to-do/things-you-need-to-know-about-hong-kongs-social-distancing-restrictions">prolonged</a> Covid-19 lockdown. Singapore has made strides since, becoming a destination for a number of hedge funds and some traditional finance market makers.&nbsp;



The crypto ambitions of Hong Kong’s Securities and Futures Commission has since begun to come into focus.&nbsp;



The process behind the retail licenses, however, has been somewhat opaque — with little indication of which company could be next to gain approval. CoinDesk <a href="https://www.coindesk.com/policy/2023/08/04/hong-kongs-new-crypto-license-could-cost-exchanges-a-pretty-penny/">reported</a>, citing three anonymous sources, that obtaining a license could cost an exchange $15 million to $20 million.



The requirements are largely outlined in a June <a href="https://www.sfc.hk/-/media/EN/assets/components/codes/files-current/web/guidelines/Guidelines-for-Virtual-Asset-Trading-Platform-Operators/Guidelines-for-Virtual-Asset-Trading-Platform-Operators.pdf?rev=f6152ff73d2b4e8a8ce9dc025030c3b8">report</a> from the commission, which imposes a number of requirements, including that registered firms hold custody of client assets in-house. Firms are also tasked with maintaining capital reserves in excess of their expenses.&nbsp;



<h2 class="wp-block-heading">Asia &#8220;growth engine of Web3&#8221;</h2>



There are also a series of steps in the application process that aren’t entirely public. Representatives for HashKey and the Securities and Futures Commission did not return multiple requests for comment.&nbsp;



Still, the city may have placed itself in a position to capitalize on companies seeking relief from regulatory crackdowns elsewhere — if not moving out of the US entirely, at least establishing a foothold outside its borders.



“Crypto is a global business and it’s our intention to continue to grow outside of the US at a much quicker pace than we were growing in the US,” Urban said. “The improving regulatory landscape is a major catalyst for this, but it’s also about opportunity.&nbsp;



Though there may be bluster involved, a number of other well-known crypto companies have publicly said they would consider a move outside America. They argue that long-running industry feuds —&nbsp;with the SEC in particular — have shown next to no signs of abating.&nbsp;



Coinbase CEO Brian Armstrong in April <a href="https://blockworks.co/news/could-coinbase-leave-us">floated such a possibility.</a>&nbsp;



Matt Lason, chief investment officer of crypto hedge fund firm Globe 3 Capital, told Blockworks that the licensing is set up to allow “retail traders to have crypto options,” plus “on and off ramps,” adding that the latter is especially essential.&nbsp;



It could add another example of the US falling behind a developed nation on its approach to crypto, he said.&nbsp;



“It’s a very positive development and even more so with what’s been going on in the US with the SEC,” Lason said. “It just proves that it’s going to be very hard any time a government tries to contain crypto. It’s worldwide. It’s decentralized. If you don’t want it in the US, it’s going to be moved over to the UAE. It’s going to be moved over to Hong Kong.&nbsp;



Hong Kong has also looked to strengthen its crypto credentials elsewhere. Its government <a href="https://blockworks.co/news/hong-kong-web3-task-force">set up a Web3 “task force”</a> earlier this year designed to research and provide recommendations for “the sustainable and responsible development of Web3 in Hong Kong.”



Elsewhere, finance regulators in Hong Kong <a href="https://blockworks.co/news/hong-kong-crypto-fund-managers">created a program for fund managers trading exclusively crypto investment products to register</a>, paving the way for digital assets-focused alternative investment managers with institutional limited partners. 



“The key thing here is that Asia is going to be the growth engine of Web3, whether you’re a Web3 company, which is very heavily based in the US, or if you’re a [venture capitalist] over there, you have to look at Asia — whether it’s from a user perspective or capital flows or the investors set up here,” Sei’s Kan told Blockworks.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Why Hong Kong could be crypto’s next ‘center of gravity’

Bessie Liu

HashKey Capital has raised half a billion dollars for the cryptoasset manager’s latest vehicle. 



The fund, HashKey Fintech Investment III, is designed to key in on “the growing opportunities in emerging [digital asset] markets,” the firm said in a statement on Tuesday.&nbsp;



It’s a notable $500 million haul in <a href="https://blockworks.co/news/bargain-basement-opportunity-for-crypto-volatility-traders" target="_blank" rel="noreferrer noopener">unsteady crypto markets</a>, and the funds have been earmarked to invest in a number of cryptocurrency and blockchain initiatives globally — under that emerging markets focus. Limited partners, according to HashKey, include sovereign wealth funds and family offices.&nbsp;



HashKey has “weathered at least three cycles in the industry,” according to Dennis Chao, the asset manager’s chief executive. The firm’s parent company, Hong Kong-headquartered HashKey Group, is known as a specialist in investing in blockchain projects in Asia and was an early backer of <a href="https://blockworks.co/tag/ethereum" target="_blank" rel="noreferrer noopener">Ethereum</a> — dating back to 2015.&nbsp;



“These unique experiences and insights will be invaluable to us in navigating through turbulence,” Chao said in a statement.



Chao’s firm has since backed a number of crypto projects that have since moved into the limelight, including Cosmos, dYdX, Animoca Brands and Polkadot. The cryptoasset manager launched in 2018. 



HashKey Group inspired Ethreum’s upcoming “Shanghai Upgrade,” according to Xia Feng, the investment manager’s chair. Shanghai is slated as the next major upgrade for the Ethereum network and is designed to allow the proof-of-stake blockchain’s validators to withdraw their staked ether, the network’s native token. 



The pending upgrade, which appears to be on track to occur in March, marks the first time validators — which verify transactions on the protocol — would mark the first time validators are able to cash in on their locked up ether, which has been accruing staking rewards. Ethereum <a href="https://blockworks.co/news/ethereum-to-reach-500000-validators" target="_blank" rel="noreferrer noopener">hit half a million</a> validators earlier this month as momentum builds toward Shanghai.&nbsp;



“We have maintained since the first day that the power of blockchain and crypto innovation can create a better future,” Feng said. “Fund III will follow our time-tested investment principles while&nbsp; also looking for game-changers, which would be those that will propel the industry forward into the next stage.”&nbsp;&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

HashKey Has ‘Weathered at Least Three Cycles.’ $500M Fund Is Latest Proof.

Jacquelyn Melinek

<div id="highlights-block_620e70fe597d8" class="highlights">
 <ul>
 <li>The Graph supports indexing data from 31 different networks, including Ethereum layer-2 network and compatible layer-1 blockchains</li>
 <li>Key projects for the fund include those building creator economies with NFTs and token design, as well as cross-metaverse identities and DAO tools</li>
 </ul>
 
</div>



A group of six investors joined forces to launch a $205 million ecosystem fund for The Graph, an indexing layer for Web3 and blockchain data.



This Ecosystem Fund isn’t an investment in <a href="https://cms.blockworks.co/semiotic-ai-receives-60m-grant-to-develop-the-graphs-ecosystem/" target="_blank" rel="noreferrer noopener">The Graph</a> — it is a fund that will invest in projects building on its protocol, Tegan Kline, co-founder and business lead at Edge &amp; Node, shared with Blockworks.



<a href="https://cms.blockworks.co/digital-currency-group-completes-600m-debt-capital-raise/" target="_blank" rel="noreferrer noopener">Digital Currency Group</a>, <a href="https://cms.blockworks.co/?s=multicoin#:~:text=Multicoin%20and%20Kraken%20Invest%20Millions%20in%20Crypto%20Startups" target="_blank" rel="noreferrer noopener">Multicoin Capital</a>, Reciprocal Ventures, gumi Cryptos Capital, NGC Ventures and HashKey provided the capital to accelerate the growth and development of projects on The Graph. Additionally, the funds will provide support from a “host of areas” and provide guidance for projects, Craig Burel, partner at Reciprocal Ventures, noted to Blockworks. 



“We believe we can identify promising new technologies and critical components in the decentralized stack and leverage our collective networks to accelerate their proliferation across Web3,” Samantha Bohbot, director of platform at Digital Currency Group, said to Blockworks.



Some key projects they’ll invest in include ones that are building creator economies with NFTs and token design as well as cross-metaverse identities and DAO tools, Andrea Zhang, partner at NGC Ventures told Blockworks.&nbsp;



The Graph uses subgraphs, which are open application programming interfaces (APIs) that use the programming language GraphQL. It supports indexing data from 31 different networks including Ethereum and its layer-2 networks Arbitrum and Optimism, plus Ethereum-compatible Polygon, Avalanche, NEAR protocol, Celo and Fantom.



These subgraphs retrieve blockchain data secured through a decentralized network on DeFi, NFTs (non-fungible tokens) and DAOs (decentralized autonomous organizations), among other things. This means decentralized applications, or dApps, can be permissionless with open APIs instead of relying on single servers.



In 2021, there was tremendous growth for the Web3 developer stack, but there is still work to be done with tooling or “middleware solutions,” Bohbot said.



“We expect [the] <a href="https://cms.blockworks.co/morgan-stanley-sees-8-trillion-metaverse-market-eventually/" target="_blank" rel="noreferrer noopener">metaverse</a> will continue to be the main narrative across the Web3 ecosystem, including <a href="https://cms.blockworks.co/?s=gamefi#:~:text=The%20Sandbox%20Parent%20Animoca%20Brands%20Raises%20%24359M%20to%20Build%20Out%20Open%20Metaverse" target="_blank" rel="noreferrer noopener">GameFi</a>, NFT projects and decentralized metaverse,” Zhang said. “One of the drivers of this trend can be attributed to the rising Web2 metaverse, both in terms of capital attracted and user adoption, which can make more people realize the benefits of decentralized metaverse infrastructure in empowering the creator economy.”



Going forward, The Graph will continue to add support for additional layer-1 and layer-2 blockchains, as well as storage networks to help grow the Web3 ecosystem, Kline said.



The speed and growth of capital and ideas in the crypto industry is unprecedented, causing a constantly shifting narrative, Burel said. Web3 data will be decentralized and The Graph’s network of over 150 validators is helping to drive this seismic shift, he added.



“We continue to be excited about DeFi, Web3 infrastructure, gaming and applications with unique features enabled by Web3 rails,” Burel commented.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.